MISSISSIPPI LEGISLATURE

2006 Regular Session

To: Finance

By: Senator(s) Robertson

Senate Bill 3002

AN ACT TO AMEND SECTION 27-65-5, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT "WHOLESALE SALES" UNDER THE SALES TAX LAW APPLY TO SALES OF BOXES, CRATES, CARTONS, CANS, BOTTLES AND OTHER PACKAGING MATERIALS TO A RETAILER OR RETAIL CUSTOM PROCESSOR FOR USE AS A CONTAINER TO ACCOMPANY GOODS SOLD BY THE RETAILER OR CUSTOM PROCESSOR, WHERE OWNERSHIP, RATHER THAN POSSESSION, OF THE BOXES, CRATES, CARTONS, CANS, BOTTLES AND OTHER PACKAGING MATERIALS PASSES TO THE CUSTOMER AT THE TIME OF SALE OF THE GOODS OR SERVICES CONTAINED THEREIN; TO AMEND SECTION 27-65-101, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT SALES OF BOXES, CRATES, CARTONS, CANS, BOTTLES AND OTHER PACKAGING MATERIALS TO A RETAILER OR RETAIL CUSTOM PROCESSOR FOR USE AS A CONTAINER OR SHIPPING MATERIAL TO ACCOMPANY GOODS SOLD BY THE MANUFACTURER OR WHOLESALER, WHERE OWNERSHIP, RATHER THAN POSSESSION, OF THE BOXES, CRATES, CARTONS, CANS, BOTTLES AND OTHER PACKAGING MATERIALS PASSES TO THE CUSTOMER AT THE TIME OF SALE OF THE GOODS CONTAINED THEREIN, SHALL BE EXEMPT FROM SALES TAXATION; AND FOR RELATED PURPOSES.

     BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

     SECTION 1.  Section 27-65-5, Mississippi Code of 1972, is amended as follows:

     27-65-5.  "Wholesaler," "jobber" or "distributor" means a person doing a regularly organized wholesale or jobbing business, known to the trade as such, and selling to licensed retail dealers or other wholesalers for resale in the regular course of business. This classification has no bearing on rates of tax due under this chapter, each sale or part of sales being taxable or exempt depending upon the class in which it falls.

     "Wholesale sales" shall apply to:

          (1)  A sale of tangible personal property taxable under Sections 27-65-17 and 27-65-25 for resale in the regular line of business, when made in good faith to a retailer regularly selling or renting that property and when said dealer is licensed under Section 27-65-27 of this chapter if located in this state.

     A sale of a service taxable under Section 27-65-23 for resale in the regular line of business, when made to a regular dealer in that service and when said dealer is licensed under Section 27-65-27 of this chapter if located in this state, or a charge for custom processing rendered upon merchandise for resale or rental by a dealer licensed under Section 27-65-27.

     A sale of telecommunications services taxable under Section 27-65-19 for resale in the regular course of business, when made to a regular telecommunications provider of such service and such provider is the holder of a permit issued under Section 27-65-27 and is located in this state or is providing telecommunications services in this state.

     "Wholesale sale" shall not include a transaction whereby property is delivered to and collection for same is made from a person that will consume the property rather than resell it even though the billing is to a retailer.

     Provided, however, that when a taxpayer sells merchandise and has paid a rate equal to the retail rate of tax on the purchase price to a wholesaler, the taxpayer may take credit for the tax paid to the wholesaler from the tax due on the sale of the merchandise specifically included in his return to the commissioner.

          (2)  A sale of tangible personal property (except sand or gravel when sold by the producer thereof) or service which is to become a component part of a structure or improvement erected, constructed, repaired, or made only when such sale is made to a contractor taxable under Section 27-65-21 of this chapter on the contract in which the component materials are to be used; and only when the contractor holds a material purchase certificate as required by Section 27-65-21 of this chapter.

          (3)  A sale of boxes, crates, cartons, cans, bottles and other packaging materials to a retailer or retail custom processor for use as a container to accompany goods or services sold by said retailer or custom processor where ownership thereof will pass to the customer at the time of sale of the goods or services contained therein.

          (4)  The value of soft drinks and syrup withdrawn from the business by a manufacturer for sale at retail and food or drink withdrawn by a manufacturer or wholesaler to be sold through full service vending machines for human consumption.

     The quantity of property or services sold or the price at which sold is immaterial in determining whether or not a sale is at wholesale.  Sales may be classed as wholesale, or exempt, only if evidenced by proper and adequate records and invoices to substantiate the wholesale rate or exemption from the tax on each individual sale.

     The substantiation of the wholesale sales must be by an invoice clearly indicating the date, the name and address of the vendor and vendee, the items sold and the price thereof.  Such proof of wholesale sales shall be filed in chronological order and thus preserved for a period of three (3) years from the date of sale.  These records shall be subject to inspection by the commissioner and his agents, at their discretion, for the verification of returns filed by either the wholesaler or his customers.

     The substantiation of an exempt sale must be by an invoice containing the same information as required for the wholesale sales.  This requirement shall apply equally to a retailer making wholesale or exempt sales.

     Any failure to comply with all the above requirements shall subject the violator to the retail rate of tax on all such violations.

     SECTION 2.  Section 27-65-101, Mississippi Code of 1972, is amended as follows:

     27-65-101.  (1)  The exemptions from the provisions of this chapter which are of an industrial nature or which are more properly classified as industrial exemptions than any other exemption classification of this chapter shall be confined to those persons or property exempted by this section or by the provisions of the Constitution of the United States or the State of Mississippi.  No industrial exemption as now provided by any other section except Section 57-3-33 shall be valid as against the tax herein levied.  Any subsequent industrial exemption from the tax levied hereunder shall be provided by amendment to this section.  No exemption provided in this section shall apply to taxes levied by Section 27-65-15 or 27-65-21.

     The tax levied by this chapter shall not apply to the following:

          (a)  Sales of boxes, crates, cartons, cans, bottles and other packaging materials to manufacturers and wholesalers for use as containers or shipping materials to accompany goods sold by said manufacturers or wholesalers where ownership thereof will pass to the customer at the time of sale of the goods contained therein and sales to anyone of containers or shipping materials for use in ships engaged in international commerce.

          (b)  Sales of raw materials, catalysts, processing chemicals, welding gases or other industrial processing gases (except natural gas) to a manufacturer for use directly in manufacturing or processing a product for sale or rental or repairing or reconditioning vessels or barges of fifty (50) tons load displacement and over.  For the purposes of this exemption, electricity used directly in the electrolysis process in the production of sodium chlorate shall be considered a raw material.  This exemption shall not apply to any property used as fuel except to the extent that such fuel comprises by-products which have no market value.

          (c)  The gross proceeds of sales of dry docks, offshore drilling equipment for use in oil exploitation or production, vessels or barges of fifty (50) tons load displacement and over, when sold by the manufacturer or builder thereof.

          (d)  Sales to commercial fishermen of commercial fishing boats of over five (5) tons load displacement and not more than fifty (50) tons load displacement as registered with the United States Coast Guard and licensed by the Mississippi Commission on Marine Resources.

          (e)  The gross income from repairs to vessels and barges engaged in foreign trade or interstate transportation.

          (f)  Sales of petroleum products to vessels or barges for consumption in marine international commerce or interstate transportation businesses.

          (g)  Sales and rentals of rail rolling stock (and component parts thereof) for ultimate use in interstate commerce and gross income from services with respect to manufacturing, repairing, cleaning, altering, reconditioning or improving such rail rolling stock (and component parts thereof).

          (h)  Sales of raw materials, catalysts, processing chemicals, welding gases or other industrial processing gases (except natural gas) used or consumed directly in manufacturing, repairing, cleaning, altering, reconditioning or improving such rail rolling stock (and component parts thereof).  This exemption shall not apply to any property used as fuel.

          (i)  Sales of machinery or tools or repair parts therefor or replacements thereof, fuel or supplies used directly in manufacturing, converting or repairing ships, vessels or barges of three thousand (3,000) tons load displacement and over, but not to include office and plant supplies or other equipment not directly used on the ship, vessel or barge being built, converted or repaired.  For purposes of this exemption, "ships, vessels or barges" shall not include floating structures described in Section 27-65-18.

          (j)  Sales of tangible personal property to persons operating ships in international commerce for use or consumption on board such ships.  This exemption shall be limited to cases in which procedures satisfactory to the commissioner, ensuring against use in this state other than on such ships, are established.

          (k)  Sales of materials used in the construction of a building, or any addition or improvement thereon, and sales of any machinery and equipment not later than three (3) months after the completion of construction of the building, or any addition thereon, to be used therein, to qualified businesses, as defined in Section 57-51-5, which are located in a county or portion thereof designated as an enterprise zone pursuant to Sections 57-51-1 through 57-51-15.

          (l)  Sales of materials used in the construction of a building, or any addition or improvement thereon, and sales of any machinery and equipment not later than three (3) months after the completion of construction of the building, or any addition thereon, to be used therein, to qualified businesses, as defined in Section 57-54-5.

          (m)  Income from storage and handling of perishable goods by a public storage warehouse.

          (n)  The value of natural gas lawfully injected into the earth for cycling, repressuring or lifting of oil, or lawfully vented or flared in connection with the production of oil; however, if any gas so injected into the earth is sold for such purposes, then the gas so sold shall not be exempt.

          (o)  The gross collections from self-service commercial laundering, drying, cleaning and pressing equipment.

          (p)  Sales of materials used in the construction of a building, or any addition or improvement thereon, and sales of any machinery and equipment not later than three (3) months after the completion of construction of the building, or any addition thereon, to be used therein, to qualified companies, certified as such by the Mississippi Development Authority under Section 57-53-1.

          (q)  Sales of component materials used in the construction of a building, or any addition or improvement thereon, sales of machinery and equipment to be used therein, and sales of manufacturing or processing machinery and equipment which is permanently attached to the ground or to a permanent foundation and which is not by its nature intended to be housed within a building structure, not later than three (3) months after the initial start-up date, to permanent business enterprises engaging in manufacturing or processing in Tier Three areas (as such term is defined in Section 57-73-21), which businesses are certified by the State Tax Commission as being eligible for the exemption granted in this paragraph (q).

          (r)  Sales of component materials used in the construction of a building, or any addition or improvement thereon, and sales of any machinery and equipment not later than three (3) months after the completion of the building, addition or improvement thereon, to be used therein, for any company establishing or transferring its national or regional headquarters from within or outside the State of Mississippi and creating a minimum of thirty-five (35) jobs at the new headquarters in this state.  The Tax Commission shall establish criteria and prescribe procedures to determine if a company qualifies as a national or regional headquarters for the purpose of receiving the exemption provided in this paragraph.

          (s)  The gross proceeds from the sale of semitrailers, trailers, boats, travel trailers, motorcycles and all-terrain cycles if exported from this state within forty-eight (48) hours and registered and first used in another state.

          (t)  Gross income from the storage and handling of natural gas in underground salt domes and in other underground reservoirs, caverns, structures and formations suitable for such storage.

          (u)  Sales of machinery and equipment to nonprofit organizations if the organization:

              (i)  Is tax-exempt pursuant to Section 501(c)(4) of the Internal Revenue Code of 1986, as amended;

              (ii)  Assists in the implementation of the national contingency plan or area contingency plan, and which is created in response to the requirements of Title IV, Subtitle B of the Oil Pollution Act of 1990, Public Law 101-380; and

              (iii)  Engages primarily in programs to contain, clean up and otherwise mitigate spills of oil or other substances occurring in the United States coastal and tidal waters.

     For purposes of this exemption, "machinery and equipment" means any ocean-going vessels, barges, booms, skimmers and other capital equipment used primarily in the operations of nonprofit organizations referred to herein.

          (v)  Sales or leases of materials and equipment to approved business enterprises as provided under the Growth and Prosperity Act.

          (w)  From and after July 1, 2001, sales of pollution control equipment to manufacturers or custom processors for industrial use.  For the purposes of this exemption, "pollution control equipment" means equipment, devices, machinery or systems used or acquired to prevent, control, monitor or reduce air, water or groundwater pollution, or solid or hazardous waste as required by federal or state law or regulation.

          (x)  Sales or leases to a manufacturer of motor vehicles operating a project that has been certified by the Mississippi Major Economic Impact Authority as a project as defined in Section 57-75-5(f)(iv)1 of machinery and equipment; special tooling such as dies, molds, jigs and similar items treated as special tooling for federal income tax purposes; or repair parts therefor or replacements thereof; repair services thereon; fuel, supplies, electricity, coal and natural gas used directly in the manufacture of motor vehicles or motor vehicle parts or used to provide climate control for manufacturing areas.

          (y)  Sales or leases of component materials, machinery and equipment used in the construction of a building, or any addition or improvement thereon to an enterprise operating a project that has been certified by the Mississippi Major Economic Impact Authority as a project as defined in Section 57-75-5(f)(iv)1 and any other sales or leases required to establish or operate such project.

          (z)  Sales of component materials and equipment to a business enterprise as provided under Section 57-64-33.

          (aa)  The gross income from the stripping and painting of commercial aircraft engaged in foreign or interstate transportation business.

          (bb)  Sales of production items used in the production of motion pictures such as film; videotape; component building materials used in the construction of a set; makeup; fabric used as or in the making of costumes; clothing, including, shoes, accessories and jewelry used as wardrobes; materials used as set dressing; materials used as props on a set or by an actor; materials used in the creation of special effects; and expendable items purchased for limited use by grip, electric and camera departments such as tape, fasteners and compressed air.  For the purposes of this paragraph (bb), the term "motion picture" means a nationally distributed feature-length film, video, television series or commercial made in Mississippi, in whole or in part, for theatrical or television viewing or as a television pilot.  The term "motion picture" shall not include the production of television coverage of news and athletic events, or a film, video, television series or commercial that contains any material or performance defined in Section 97-29-103.

          (cc)  Sales or leases to an enterprise owning or operating a project that has been designated by the Mississippi Major Economic Impact Authority as a project as defined in Section 57-75-5(f)(xviii) of machinery and equipment; special tooling such as dies, molds, jigs and similar items treated as special tooling for federal income tax purposes; or repair parts therefor or replacements thereof; repair services thereon; fuel, supplies, electricity, coal and natural gas used directly in the manufacturing/production operations of the project or used to provide climate control for manufacturing/production areas.

          (dd)  Sales or leases of component materials, machinery and equipment used in the construction of a building, or any addition or improvement thereon to an enterprise owning or   operating a project that has been designated by the Mississippi Major Economic Impact Authority as a project as defined in Section 57-75-5(f)(xviii) and any other sales or leases required to establish or operate such project.

          (ee)  Sales of parts used in the repair and servicing of aircraft not registered in Mississippi engaged exclusively in the business of foreign or interstate transportation to businesses engaged in aircraft repair and maintenance.

          (ff)  Sales of component materials used in the construction of a facility, or any addition or improvement thereon, and sales or leases of machinery and equipment not later than three (3) months after the completion of construction of the facility, or any addition or improvement thereto, to be used in the building or any addition or improvement thereto, to a permanent business enterprise operating a data/information enterprise in Tier Three areas (as such areas are designated in accordance with Section 57-73-21), meeting minimum criteria established by the Mississippi Development Authority.

          (gg)  Sales of component materials used in the construction of a facility, or any addition or improvement thereto, and sales of machinery and equipment not later than three (3) months after the completion of construction of the facility, or any addition or improvement thereto, to be used in the facility or any addition or improvement thereto, to technology intensive enterprises for industrial purposes in Tier Three areas (as such areas are designated in accordance with Section 57-73-21), as certified by the State Tax Commission.  For purposes of this paragraph, an enterprise must meet the criteria provided for in Section 27-65-17(1)(f) in order to be considered a technology intensive enterprise.

     (2)  Sales of component materials used in the construction of a building, or any addition or improvement thereon, sales of machinery and equipment to be used therein, and sales of manufacturing or processing machinery and equipment which is permanently attached to the ground or to a permanent foundation and which is not by its nature intended to be housed within a building structure, not later than three (3) months after the initial start-up date, to permanent business enterprises engaging in manufacturing or processing in Tier Two areas and Tier One areas (as such areas are designated in accordance with Section 57-73-21), which businesses are certified by the State Tax Commission as being eligible for the exemption granted in this paragraph, shall be exempt from one-half (1/2) of the taxes imposed on such transactions under this chapter.

     (3)  Sales of component materials used in the construction of a facility, or any addition or improvement thereon, and sales or leases of machinery and equipment not later than three (3) months after the completion of construction of the facility, or any addition or improvement thereto, to be used in the building or any addition or improvement thereto, to a permanent business enterprise operating a data/information enterprise in Tier Two areas and Tier One areas (as such areas are designated in accordance with Section 57-73-21), which businesses meet minimum criteria established by the Mississippi Development Authority, shall be exempt from one-half (1/2) of the taxes imposed on such transaction under this chapter.

     (4)  Sales of component materials used in the construction of a facility, or any addition or improvement thereto, and sales of machinery and equipment not later than three (3) months after the completion of construction of the facility, or any addition or improvement thereto, to be used in the building or any addition or improvement thereto, to technology intensive enterprises for industrial purposes in Tier Two areas and Tier One areas (as such areas are designated in accordance with Section 57-73-21), which businesses are certified by the State Tax Commission as being eligible for the exemption granted in this paragraph, shall be exempt from one-half (1/2) of the taxes imposed on such transactions under this chapter.  For purposes of this subsection, an enterprise must meet the criteria provided for in Section 27-65-17(1)(f) in order to be considered a technology intensive enterprise.

     (5)  (a)  For purposes of this subsection:

              (i)  "Telecommunications enterprises" shall have the meaning ascribed to such term in Section 57-73-21;

              (ii)  "Tier One areas" mean counties designated as Tier One areas pursuant to Section 57-73-21;

              (iii)  "Tier Two areas" mean counties designated as Tier Two areas pursuant to Section 57-73-21;

              (iv)  "Tier Three areas" mean counties designated as Tier Three areas pursuant to Section 57-73-21; and

              (v)  "Equipment used in the deployment of broadband technologies" means any equipment capable of being used for or in connection with the transmission of information at a rate, prior to taking into account the effects of any signal degradation, that is not less than three hundred eighty-four (384) kilobits per second in at least one direction, including, but not limited to, asynchronous transfer mode switches, digital subscriber line access multiplexers, routers, servers, multiplexers, fiber optics and related equipment.

          (b)  Sales of equipment to telecommunications enterprises after June 30, 2003, and before July 1, 2013, that is installed in Tier One areas and used in the deployment of broadband technologies shall be exempt from one-half (1/2) of the taxes imposed on such transactions under this chapter.

          (c)  Sales of equipment to telecommunications enterprises after June 30, 2003, and before July 1, 2013, that is installed in Tier Two and Tier Three areas and used in the deployment of broadband technologies shall be exempt from the taxes imposed on such transactions under this chapter.

     SECTION 3.  This act shall take effect and be in force from and after July 1, 2006.